When mortgage rates are high, many buyers are less inclined to make a home purchase. This can end up being bad news for sellers.
Conventional wisdom has called for staying put until rates cool off. But with “mortgage rates on the cusp of topping 7% for the fifth year in a row, it might be time to stop waiting for lower rates to put your home on the market,” said The Wall Street Journal. It may also be a good time to get more strategic.
How do high mortgage rates affect home sales?
Higher mortgage rates squeeze the budgets of buyers. Because “rising mortgage rates reduce purchasing power even when home prices change little,” prospective buyers may “lower their target price or postpone a purchase,” said U.S. Bank. Buyers are also likely to be more cautious and critical about making an offer. When rates are high, they are “quick to walk away from homes that are overpriced or in poor condition,” said the Journal.
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For sellers, this means they may not sell their home for as much as they want or get it done as quickly as they want. While there are exceptions, “most sellers can no longer count on a swift sale,” said the Journal. They may also be forced to make concessions and address issues they may have otherwise avoided in a seller’s market.
What can you do to sell when mortgage rates are high?
When buyers are price-sensitive, “pricing your home correctly from the start is one of the most important things you can do,” said Homie, a real estate technology company. “Overpricing can scare buyers away, while smart pricing can lead to more offers — and even a bidding war.”
If you do get an offer, it’s worth being a little flexible. Although “five years ago, sellers could say no to repairs and rely on a backup offer,” today, it “might pay to provide a reasonable credit or fix the problem,” said Chris Wands, a Douglas Elliman real estate agent, to the Journal. It could additionally help to offer concessions, like paying closing costs, in order to make the sale.
Last but not least, it is vital that your home is in tip-top shape when you begin showing it. “Standing out from the competition is particularly important when interest rates are high because buyer traffic will be lower,” said REMAX.
Is it worth staying put instead of selling?
“When you look at the actual numbers, the high mortgage rates seller’s dilemma makes sense,” said REMAX. Still, “homeowners waiting to sell their homes due to high interest rates need to think about the whole picture.” Consider what the trade-offs are of postponing a move you want to make, and factor in the possibility that home prices themselves could go up while you are waiting for mortgage rates to fall.
It’s worth pointing out that staying where you are and selling are not necessarily the only two options on the table. As a third path, “owners holding ultralow fixed-rate mortgages can take advantage of the strong rental demand,” said Ben Dixon, another Douglas Elliman agent, to the Journal. “High rents might cover carrying costs, generate cash flow and allow the owner to hold on to their low-cost debt until the market takes a turn for the better.”
